I grew up on Cape Cod, Massachusetts, and currently reside in Florida.
In this article, I will paint a picture of what Disney will look like once the M&A dust clears and whether I believe the new Disney+ will be able to compete and win vs. other streaming media companies.
Disney Studio Entertainment continues to show strong growth with segment revenues and operating income up 19% and 27%, respectively, in 2018.
The new Pixar Pier opened in Disney California Adventure, and the new Toy Story Land opened in Disney World Orlando in 2018. The opening of the new Star Wars Lands at their Disneyland and Disney Hollywood Studios will have Disney and Star Wars fans alike flocking to the parks in 2019 and beyond.
In short, Disney is investing and building across the board, but its biggest growth in profits and presence will come from Disney+ which will release its streaming platform in 2019.
Disney’s direct to consumer streaming service will pay huge dividends in the years to come as its content is second to none. Disney is a conglomerate stuffed with highly recognizable brand names like Pixar, Marvel, Lucasfilm, FOX, ABC, ESPN, Lifetime, the digital streaming site Hulu, and more.
Disney has been preparing for this streaming venture for years now, they acquired majority ownership of BAMTech in 2017 and launched the ESPN+ multi-sport streaming service in early 2018. Stepping stones to releasing Disney+.
Streaming TV and film content has dramatically changed the media industry in recent years, and how people watch (consume) movies and shows. More than 35 million cable subscribers have canceled their service and moved on to streaming (internet) commercial-free services in recent years. This has resulted in declining earnings and valuation multiples for ‘old fashioned’ broadcast TV companies such as CBS, NBC, and Disney channels. Disney had been particularly vulnerable to cord-cutting due to ESPN being among the more expensive channels in the traditional cable bundle, as well as its ABC and cartoon channels.
Out with the Old in with the New?
Netflix had the good fortune to be the successful pioneer of streaming content, and being new and successful at anything makes it easy to dominate a market, for a while, until you have legitimate competition.
In 2018, Netflix carried content from Disney, Fox, and Time Warner. In 2019 and beyond, all that goes away.
Disney will not just pull out its content, but with its recent acquisition of Fox, will remove that content as well. In addition, the AT&T Time Warner merger means AT&T will be doing the same, pulling content from Netflix. Pretty soon, the only product Netflix will have available to offer is what it creates, and at the same time it will be competing against new rivals Disney+ and AT&T.
But this is not about why I believe Netflix is about the go the way of AOL and Yahoo, this is about why Disney is about to become the #1 streaming and entertainment service in the Americas (and probably the EU as well).
Disney has the experience, 95 years of it, it has always been in the movie making and entertainment business, it has created tv shows in all forms and at all levels of production, it has entertainment parks all over the world, hotels, websites, which it will now combine with the largest amount of marketable products for children (Disney, Marvel, Star Wars, Jim Henson Co. etc.) as well as sports fanatics (ESPN) of any of its potential competition.
Well led, forward looking companies react to changing markets and Disney has been aggressively re-positioning itself these past few years to thrive in the new media paradigm that streaming players such as Netflix and Amazon have created. But they did it in a deliberate, well thought out way, that didn’t have them taking on crippling debt (as many feel AT&T did) or push a product to market too quickly and haphazardly.
First, Disney announced it would acquire a majority ownership in BAMTech in 2017, in order to launch a direct-to-consumer (DTC) ESPN sports streaming service in 2018. Then, Disney announced it was ending the distribution deal with Netflix to launch its own streaming service by 2019. Finally, Disney announced it would acquire 21st Century Fox to boost its content library so that it would have the substantial scale with which to launch its Disney+ streaming service, which right out of the gates should be competitive with Netflix.
Netflix will have to invest tens of billions of dollars to immediately try and fill the void of the wealth of lost material (to Disney and AT&T), which in all honesty it just can’t replace. There is no replacing Iron Man with a Netflix alternative, there is no replacing Star Wars for those fans who live & breathe ‘the force’.
While Disney should be a powerhouse from the start, AT&T could prove to be a prime example coming to the party too late, and without enough content. Unlike Disney, AT&T doesn’t have the background and experience in the entertainment industry, nor did it get blockbuster favorites that are worth billions (IE - Star Wars, Marvel) from the deal with Time Warner.
Disney is carrying only a small amount of debt, despite all its recent acquisitions, and has a consistent growing revenue which could very well double in just a couple of years if its streaming efforts have half the success Netflix has had, considering the wealth of fan loved content they have secured and the trusted name of Disney.
There is one area of concern I do have, however, while Disney CEO Bob Iger is as rock solid as they come, some of the heads of other Departments, such as the decision makers for the Star Wars franchise, and now perhaps seeping into the wildly popular and profitable Marvel, may have cost them billions in lost revenue; primarily for one reason only, they put politics (or what some call 'SJW agendas') ahead of giving fans what they want to see, or what they expect.
With the latest Star Wars trilogy to hit the theatres they took fan loved idols like Han Solo (Harrison Ford) and Luke Skywalker (Mark Hamill) and make them seem like cranky, hapless, non-heroic jerks, while also ignoring all sorts of canon about how Lightspeed and the Force worked. In addition Star Wars fans complained about disjointed plots, no depth of character to the main characters, and more.
If they do not correct from this effort of putting social messaging ahead of good story plots and directing, I am concerned for the future of not just Star Wars, but the Disney brand as a whole.
I do see this as the biggest threat to Disney’s profits and level of success. And why I believe this may be continuing, and shifting over to their Marvel Productions, is that recently James Gunn was fired from ‘Guardians of the Galaxy’ in a situation that shows Disney put concern that an angry minority may be offended with long past deeds over the production of a very successful series, and the desires of millions of fans (see Video below).
There is no official release date for Disney's streaming service but Iger has said the platform is slated to launch in the latter half of 2019.
In a statement, Iger said he was excited about "opportunities ahead for continued growth."
In the works are a live-action "Star Wars" series, new episodes of the animated "Star Wars" and new series related to the "High School Musical" and "Monsters Inc." movies.
Iger also said that movies Disney plans to release in 2019, including "Captain Marvel," ''Dumbo," "Toy Story 4" and "Frozen 2," won't be encumbered by licensing deals and can go straight to Disney Plus soon after their theatrical releases.
Disney seems to be doing almost everything right, Disney is plowing all their capital into acquisitions and creating new content, and that is what will make them a success.
Additional Reading and References
- Netflix Could Lose 20% of Its Top Content as Soon as 2020 -- The Motley Fool
Or it will have to pay outrageous prices to keep some of it.
- Can Disney's Streaming Service Compete With Netflix? Eleven Tech Pros Weigh In
Disney will have to address legacy technology and culture if it wants to be a serious competitor to streaming giant Netflix.
- Disney Streaming Service Has New Details | Fortune
Disney is gearing up to launch a streaming service to compete with the likes of Netflix, and its strategy is starting to take shape.
© 2018 Ken Burgess
Ken Burgess (author) from Florida on January 02, 2020:
Looks like after just a few weeks Disney+ has already crossed the 25 million subscribers mark. Will be looking to see their official number when they report the next qtrly. Will probably do an update to the article once that info comes out.
Ken Burgess (author) from Florida on December 12, 2019:
Thanks Angel, I am glad you liked it, I do believe by the end of 2020 Disney will be doing quite well with their Streaming service, they already have more than 10 million subscribers, and they just started it.
Angel Guzman from Joliet, Illinois on December 04, 2019:
It was a very smart move by Disney to launch a streaming service and I wouldn't mind being a subscriber. Very good read and insight Ken.